Euro area countries have prepared a contingency plan in the event of the failure of negotiations with Athens. It provides for, inter alia, the introduction of controls on capital movements between Greece and other countries. The case tells German newspaper “Sueddeutsche Zeitung”.
Eurozone finance ministers meet this Thursday in Luxembourg to discuss Greece. This is one of the last opportunities to reach an agreement with Athens. If the game ends in a fiasco, Greek bankruptcy will be closer than ever. So the eurozone countries prepared a contingency plan.
According to the “Sueddeutsche Zeitung”, yet on Friday may be extraordinary summit of the leaders of the eurozone countries at which they are to look for a political solution. At the same time they have to prepare the introduction of controls on capital movements between Greece and other countries. This is to prevent a massive outflow of money from Greece.
KE persists Greece
The European Commission presented on Monday officially expectations of creditors to Greece. These include budget savings and changes in the pension system. The EC announced a “significant concessions”, which until now has been made towards Athens. Warufakis answers: Greece will not present new proposals for reform.
A spokeswoman for the European Commission. Economic and Financial Annika Breidthardt stressed at a press conference that the proposals institutions, namely the European Commission, the European Central Bank and the International Monetary Fund, “shall have an economic sense “and take into account the interests of both citizens and government of Greece and the other 18 euro area countries.
” Greece will not present new proposals for reform “
The finance minister Greece Janis Warufakis said in an interview with the German newspaper “Bild” (Tuesday edition), that at the next meeting of the Eurogroup in Luxembourg will not present new proposals for reform, which are demanding from Athens creditors.
– Meeting of euro zone finance ministers is not the appropriate forum for the presentation of proposals that have not been the subject of discussions and negotiations at a lower level – Warufakis said.
The next meeting of the Eurogroup finance ministers is planned on Thursday and Friday in Luxembourg.
The dramatic situation of Greece
– The decision on aid for Greece is political and should be taken by democratically elected politicians, not heads of central banks – said Monday the ECB president Mario Draghi. In his opinion, the economic situation of Greece is dramatic.
Draghi rating in a speech before the European Parliament that the decision on financial support to Greece belongs to the Eurogroup. – Therefore, it is a political decision that must be taken by elected politicians, not by the central banks – said Draghi. – The ball is on the side of the Greek authorities – he said, noting the need for a rapid agreement not only in the interests of Greece, but the whole euro zone.
Budget cuts
The program for Greece is based on five pillars. The first is the “significant fiscal adjustment”. As announced Breidthardt, Greece should by 2016 develop a so-called. primary budget surplus, ie. before taking into account debt servicing costs, at 2 percent. GDP, and in 2018 – 3.5 percent. GDP.
Improved tax collection
The second pillar is the improvement of tax administration, including the fight against tax evasion. In addition, creditors expect Greece will strengthen the stability of the financial system, eg. By measuring the problem of non-performing loans. The program also envisages structural reforms, including labor market and modernizing the public sector, including the fight against corruption. Breidthardt stressed that these are the demands in line with the declaration of the Eurogroup of 20 February and discussed them repeatedly.
European Commission spokesperson pointed to the concessions that have been made against Greece in the area of public finances. – The objective for 2015 has been significantly reduced – she said. – 1 percent primary surplus. GDP is much less than 3 percent. GDP resulting from the program. Also, the surplus target in the medium term was reduced to 3.5 percent. with 4.5 percent. GDP. – This is a significant concession – Breidthardt said. – Also target date has been extended by two years until 2018 – she added.
The reform of the pension system
Breidthardt announced that the reports of the fact that creditors demand or pension cuts demanded are “substantial misrepresentation”. The EC estimates that the pension system is one of the largest parts of expenditure and stresses that the Greek system is one of the most expensive in Europe. – Therefore, its reform is part of the requirements – a spokeswoman said. Reforms have to rely on the extinction of the possibility of early retirement, raising the age emertytalnego and removing “perverse incentives” for early retirement.
Creditors, in the words of spokeswoman for the European Commission, want to see in the long term, the system was solvent and its reform should generate annual revenues of approx. 1 percent. GDP savings. – Meanwhile, Greek proposal for 2016 was 71 million, or less than 0.04 percent. GDP – Breidthardt said.
Smooth the issue of salaries
The spokeswoman stressed that the creditors do not insist on further cuts in wages, the recovery program of the Greek economy “does not necessarily mean salary reductions necessary. “
– They should grow with the needs of productivity and economic competitiveness – she added. Breidthardt said that the proposals open the door to modernize the system of collective wage fixing, with independent bodies and international organizations such as the Organization for Economic Cooperation and Development and the International Labour Organisation.
The tightness of the tax system
– Greece has a very fragmented system of VAT – Breidthardt said. – All agree that improving the collection of VAT is a necessary and useful – she added. How spokeswoman, Athens proposed a substantial widening of the tax base for the rate of 23 per cent., With two reduced rates for a limited number of goods. – Institutions have expressed clearly that there is room for discussion on the proposals of the authorities, provided that the accounts are correct – concluded.
Varoufakis wants to reduce the Greek debt
Greece’s finance minister again demands that Athens donated part of the debt. Yanis Varoufakis says about this in an interview with German newspaper “Bild”.
Yesterday fiasco ended another round of talks between the European Commission and Greece on aid to the country. In an interview with the newspaper Yanis Varoufakis said that Greece dispenses with additional financial assistance, if creditors forgive Athens portion of the existing debt. He said that his country needs debt reduction, because only in this way will be able to guarantee repayment of the largest part of its obligations. Greece is not the first time calls for a reduction, but creditors do not want to hear about it.
Athens urgently need cash
The current negotiations concern, moreover, something different, and namely the conditions under which Athens will receive the overdue financial assistance. It comes with over 7 billion euros, without which Greece could go bankrupt later this month. In an interview with “Bild” the Greek minister assessed that the agreement with creditors is still possible. In his opinion, a compromise can be achieved overnight.
Greece await difficult decisions
The agreement of Greece with international financial institutions will require “difficult decision of all the parties”. So said Olivier Blanchard, the leadership of the International Monetary Fund.
In this way, referred to the interruption of talks last chance for rescuing the Greek economy. As posted on the official blog of the IMF, “the difficult choices and tough commitments they should be taken by all parties”. – We believe that the agreement taking into account the point of view can be achieved – he added.
“Salvation for Greece exit from the eurozone and devaluing”
The best solution to the problems of Greece this country would exit the euro zone and carry out devaluation – said the PAP in an interview with German economist, head of the Institute for Research on Economics, Ifo in Munich, Hans-Werner Sinn.
– The best solution for Greece would be withdrawal from the euro zone and devaluation. “Grexit” would not be a disaster. He would give Greece a chance to rebuild jobs – Sinn said.
– The Ifo institute analyzed the situation of 70 countries that have declared insolvency, then devalued. All these countries, after two or three years, again recorded growth. And so would also be the case in Greece – he added.
Advantages of devaluation
He pointed out that devaluation would mean that imported goods would be more expensive, and the Greeks would buy more from domestic producers. It would increase tourism, and after some time to Greece would resume private capital, output now abroad. According to Sinn
“Grexit” would not lead to turbulence in financial markets, because for the past five years private investors have managed to get rid of bonds this country.
– However, the “Grexit” is not likely, because the great politics is still going to make money to Greece remaining in the euro area and to avoid political difficulties related to the implementation Grexitu. It would require a lot of effort on either side. And if all this can be put off for later, to get involved in this have someone else who is in power, it has also some advantages that the current rulers – said Sinn.
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Greece touched “Dutch disease”
In his view previous strategy against Greek crisis He not worked. More than 200 billion euros of international financial assistance, which the country has received over the past five years, allowed the Greeks to survive without building the competitiveness of their economies. – Economists call it the “Dutch disease”. When the Netherlands discovered gas deposits and began to sell it in the world, attracted a lot of money, wages could be increased. The result was that the export sector lost its competitiveness. Thus, the job is not preferred when the outside flows lot of money. In fact, it destroys jobs – Sinn said.
Over the past five years, when Greece was under drip euro zone and the IMF, the country’s economy collapsed – assessed. -We There is a 50 percent unemployment among young people and the overall unemployment rate of nearly 25 percent. This is a terrible outcome – Sinn added. According to him
aid to Greece was expressed 35 times higher than the support we have received Germany under the US Marshall Plan after World War II.
Threatened with bankruptcy, Greece is negotiating for months with the EC, IMF and ECB, they are demanding structural reforms in exchange for unblocking the next tranche of aid amounting to approx. 7.2 billion euros. Unlocking these resources is crucial, because the Greek cash register is empty and is approaching maturity debt. This month, Greece should ask the IMF approx. 1.6 billion euros, and in the summer – give 6 billion of the ECB. On Sunday, another round of talks ended without agreement because – as announced KE – discrepancies “between the Greek authorities’ plans and requirements” set by creditors.
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